Are Emerging Economies Better Positioned for Sea Change in the Global Economy?

The McKinsey Global Institute [1] sites four global forces that are reshaping the world: urbanization, accelerating technological change, the challenges of an aging world population, and greater global connections in areas such as trade, people, finance and data. The article calls to action corporations and economies to ready themselves for very uncertain and differentiated future times and to resist the urge to rely on past experiences to inform future behavior. As this sea change occurs with the confluence of all four trends happening at the same time, might this unknown future landscape level the playing field amongst developed and developing nations? With past experience becoming less valuable in dramatically changed times, might developing countries benefit from starting with a “clean slate” and relying more on data analysis than intuition?

Yes. A great opportunity exists for developing countries to “leapfrog” a significant portion of the traditional development path. In particular the changing demographics and accelerating technological change coupled with connection in data position these countries better to navigate the waters of the sea change.

The article sites that for the first time in human history our aging world population could mean that the planet’s population will plateau in most of the world. The operative world is “most.” Many developing countries continue to see a growing population. And although this growing population puts greater pressure on resources, it also affords a larger workforce. If developing countries must traverse some of the traditional development path and initially rely on labor-intensive activities, there is a workforce to support such an occasion.

Ideally emerging nations will be able to more quickly transition their labor force from lower-skilled to middle-skilled. Accelerated technology will enable this transition. As stated in the article, “Technology offers the promise of economic progress for billions in emerging economies at a speed that would have been unimaginable without the mobile Internet…[and allows business] to gain scale with stunning speed while using little capital.” Business is not the only sector to gain scale with using little capital; government and non-profit organizations have to potential to leverage technology and data for growth and greater impact. For example, mature economies and governments may heavily rely upon past experiences regarding how to react to dramatic changes. Although much data and analysis exists, these established organizations often favor their “guts.” Additionally, an established organization may desire to apply a drastically different approach in response to the change but the organization is too rigid, large, or complex to execute. Emerging nations however may be starting with fewer formalized systems or no systems at all. Also, having little to no past experience with a particular challenge may lend the organization to more heavily rely upon data. Combined theses emerging countries have the elasticity and bias towards data-driven decisions to address new challenges with new approaches. Moreover developing nations have been doing more with less for generations; there is an industriousness that may be applied to taking advantage of ubiquitous technology such a mobile. We see this with applications in mFarming, mHealth and mBanking.

[1] The Four Global Forces Breaking All the Trends (McKinsey Quarterly, April 2015); http://www.mckinsey.com/insights/strategy/the_four_global_forces_breaking_all_the_trends